The Future of Business Operations is here - The Digital OneOffice™

Monthly Archives: Feb 2012

In Part I of Poole's patter, we heard from BPO veteran David Poole sharing some of his thoughts on where BPO is eventually heading- and he began the conversation by discussing the fact that "outsourcing" will gradually been replaced by "venturing", where providers will do as much due diligence on their clients as clients do on them to analyse and dig out the true joint opportunity.

Essentially, David argues that a new breed of providers are seriously trying to figure out the added value they can provide so they can share it to create a true win-win with their future engagements. He also points out that providers paid by results or so called business outcomes is little more than jargon, and frankly the evidence of this in practice is pretty slim.

So in reality, we know where the industry is heading, we just haven't reached the point where these new developments are really happening in practice. However, one core trend that is clearly going to kick-start the process of venturing versus actual outsourcing, is the fact that most providers today no longer need to "lift and shift" client staff into their organization to effect the knowledge transfer - they can now use their existing delivery staff. Hence, the actual process of "outsourcing" operations is fast becoming moot - this transfer of labor, technology and domain acumen is no longer needed in many of these business process engagements, because the provider already brings these qualities to the table. So let's zone-in on the patter-tastic protagonist himself, David Poole...

You may recall we've been a tad harsh on the municipality of Orlando over the years here on HfS, once even going as far as equating being middle-seated en route to the Floridian enclave as being stuck in purgatory all the way to the gates of hell. After many lost nights' sleep trying to seek out that elusive morsel of innovation, it has finally dawned on us: where better to look than the Magic Kingdom? So after writing a personal letter of apology to both Jeb Bush and Mickey Mouse (was an easy copy/paste) we are delighted to announce that HfS is making an Orlando tribute tour to SSON's magical 16th Annual Shared Services & Outsourcing Week:

We'd love to meet you at the Hilton, Orlando, March 7th-9th, where you'll get the usual deluge of panels, G6 big-thinking debate, session break outs and every single possible angle you can ever attribute to shared services and outsourcing. We're also excited to feature on the analyst discussion with our good pal Stephanie Moore of Forrester Research (read her HfS interview here) and to have an on-stage interview with Microsoft's Chief Procurement Officer, Tim McBride (read his interview and HfS case discussion here). And yes... you may even discover a morsel of innovation before resorting to scourcing the bottom of your wine glass.

And... of course... our friends at SSON are extending a special discount to our loyal cynical HfS readers, who have been so cruelly brainwashed against the magical delights of Orlando and its sourcing magic...

Just click here and type in the code 'SSOW12_HFS' to take advantage of our special "Orlando we are ready to try again" 15% discount

Did anyone see this day coming? Yes indeedy, the day procurement gets a makeover has finally arrived, with brand-spanking new liveries and catchy brand names for both the Buying Team and ICG Commerce who've renamed themselves Proxima and Procurian respectively.

No - they aren't venturing into wonder drugs or high-end restaurant chains - they are simply sexing-up their procurement with more P's and less Zzzzz's... so why now, and - in fact - why at all? Let's leave it up to a man who once counted paper clip purchasing by the million-load, HfS research's Tony Filippone himself. Over to you, Tony...

Pure-play procurement outsourcing heats up, triggering two name changes among procurement-focused service providers

You’d think that down-to-earth procurement guys (and gals) would avoid the expense of renaming a firm, but within the span of less than five days two procurement outsourcing service providers did exactly that. Yet, the rationales behind their name changes are quite different.

Proxima (formerly Buying Team) based its new name on the need for procurement to leave behind its cost savings heritage that has always marginalized its value in the eyes of its internal customers. In the place of cost savings, Proxima wants to focus on developing procurement’s “proximity” and “intimacy” with the broader objectives of its business unit. Proxima hopes to

Many of you will remember one of the legends of BPO, Deputy David Poole, who's spent much of his career fighting BPO crime on the streets of Chicago for Capgemini (where he actually rolled up with the job title "Deputy").

He was also a founding member of PwC's global BPO business prior to IBM acquiring their operations, having made a significant contribution to the development of the global BPO industry, crafting several major global engagements since the early ‘90s.

David's thought to have skipped town, after a shootout at the Outcome-based Corral and is rumored to be trawling the streets of London seeking out errant processes in dire need of transformation. In the meantime, we managed to track him down somewhere in the ethernet to share some of his thoughts on where the BPO market is heading.

So without further ado, here's Part I, where he discusses future of BPO having less to do with outsourcing and much more to do with venturing - a blurring of the lines between the client and the provider...

Venturing – Sharing of risks and rewards between clients and providers

Imagine a World where providers actually put their money where their mouths are. I don’t mean just putting their margins at risk (tied up with so much legal jargon there actually isn’t any risk). I mean really working out the added value they can provide and taking a share of that to create a true win – win. This will be a world where providers will do as much due diligence on their clients as clients do on them to analyse and dig out the true joint opportunity. Sound familiar? Well certainly not in the BPO World we know today, but much more like the venture capital world. In fact, perhaps Business Process Venturing has a nice ring to it?

So far, providers paid by results or so called business outcomes is little more than jargon, and frankly the evidence of this in practice is pretty slim, perhaps with the exception of more knowledge-based and directly financially measurable processes like in collections or procurement. The lucrative BPO market of the past few years has been extremely cosy and risk averse but this is all about to change.

I predict a new breed of deal and provider will emerge in the coming years, sending shivers through the current providers risk management processes but forcing the type of change and commitment to process excellence that the buyers always thought they were getting but in fact were not. I don’t think it’s a bad thing for the providers either because it creates the opportunity for the best ones to truly monetise the return from the investments they have made in processes, analytics, technology and facilities. This is because the overall influence providers will have over the delivery in this much more collaborative environment will be far greater and less bounded by the restrictive contracts we as an industry have over time developed to protect clients from the big bad providers.

Stay tuned for more of Poole's patter, which pinpoints the potential of virtualized delivery, utility delivery models and the end of consulting as we know it (gasp)...

We’re gearing up for our HfS 50 Sourcing Blueprint Sessions, taking place April 24-25 in New York City for a two day spectacle of sourcing-savvy soliloquies:

One year on and the HfS 50 just got bigger and badder than ever

Over the last year, our elite peer group of sourcing buyers has doubled in size - making this our biggest, baddest and most discussion-rich meeting to date. And in response to the high-demand, we have managed to extend an extra ten invitations to the event - so if you are a client of BPO or IT services, a shared services or governance leader, or a senior service provider executive and would like to get involved with the HfS 50, please contact Tom Ivory for more information.

This exclusive event will include the development of a 2015 Blueprint for the sourcing industry, culminating in a tempestuous vendor/buyer face-off that will include leaders hand-picked from several of the top tier service providers.

Key discussions will include the following titillating topics:

What do we want - and what should we expect - from the vendor account manager?

Outsourcing higher value processes - what's feasible and how options should be evaluated

When it comes to nearshore, anyone in the know knows Kirk Laughlin and his nearshore news site Nearshore Americas... and we're excited to let you know that HfS is being beamed up to lead the key session at Kirk's annual nearshore sourcing shindig, aptly named Nearshore Nexus:

The conference will feature over 20 speakers, including top CIOs, sourcing advisors and also welcomes delegates from more than 15 countries in the region. Special features include:

Keynote presentation by Mr. Alvaro Uribe, Former President of the Republic of Colombia (2002-2010).

A “Buyers’ Super Session”, featuring deep analysis of costs, contracts and benchmarks, led by our own Esteban Herrera, COO at HfS Research.

Panel sessions on Vendor Management in a multi-provider, multi-geographic environments; selecting sites for new operations in Latin America and overall drivers and risk around doing business in Latin America.

Dedicated sessions on Sourcing to Mexico and Sourcing to Brazil.

Nexus “After Dark” featuring live entertainment at the conclusion of the conference.

Thank God services providers don't like buying each other very much. There are scores of IT services and Business Services providers today competing for every help desk, invoice processing, app dev, clinical data management (etc.) deal.

For smart services buyers, they are spoiled for choice to keep their providers on their toes to get as much attention, talent, technology and inspiration that they can squeeze out of them. And if they only care about low-cost, there are plenty of providers who'll kill themselves to do their work as cheaply as is humanly possible.

When I watch Oracle and SAP rapidly clean up whatever application is left on the market worth buying, my heart sinks for the future of the enterprise software business. For Oracle and SAP, it's all about maintaining the status quo and growing their considerable license revenue streams. They know they have to be seen to embrace the Cloud, but all they really care about is protecting their customer bases and preventing upstart vendors sneaking in to disrupt their revenue model. And can you really blame them? It's economics 101...

The Phoenicians were the greatest entrepreneurs of their time, dominating the trade of the ancient world and founding colonies throughout the Mediterranean. We will never see the likes of them in the modern business world, where a nation of business hungry folk could possibly develop their own real estate within today’s Global 2000 organizations through savvy barter of their own wares. Or will we? Deborah Kops investigates…

India's Sourcing Leaders — the New Phoenicians

"Maximo innovation at unbeatable prices... hurry while stocks last"

At a sourcing conference cocktail party in Singapore, I was chatting pleasantly to a gentleman who-- Indian by nationality, Kenyan by upbringing---was leading a global sourcing strategy team in Dubai for one of the largest of multinationals. As he politely tried not to blow smoke in my face, I had one of those eureka moments— I was speaking to a Phoenician!

(Be patient with me, readers…I’m drawing an analogy in order to make a point. Perhaps a little history lesson might be a diversion from treatises on governance or the consolidation of the outsourcing industry. I’ll try not to be too much of a bluestocking.)

For those of you who are not familiar with Phoenicians, it’s not a dirty word. Phoenicians —the “red people”—that dominated the regions proximate to the Mediterranean from the ninth to the six centuries BC, were a significant cultural and political force. They grew rich trading the commodities of the time—olive oil, wine, timber and precious metals, and were unmatched city builders, developers and stonemasons, hydraulic engineers and superb mariners.

But their greatest contribution was as globalizers of the only region that mattered in the ancient world. As developers of the modern alphabet (yes, without Phoenicians who knows how you’d be reading this), and acting as cultural middlemen, the Phoenicians disseminated ideas, myths, and knowledge. As a result, the Mediterranean arguably became the first example of a world economy.

We're very excited to announce that we've partnered with ACCA (the Association of Chartered Certified Accountants) to conduct the largest-ever global study of finance professionals to understand adoption trends, experiences and dynamics of shared services and outsourcing for the finance function.

Are you achieving sourcing success for your finance function? Click to take part in our survey

Members of the ACCA global membership and HfS Research's own network of finance and sourcing professionals are being surveyed over the next couple of weeks across organizations of all sizes, industries and regions.

We will gain an unprecendented global picture of finance and accounting sourcing from well over 1000 organizations:

What CFOs and senior finance executives really think about shared services and outsourcing;

How organizations' adoption patterns of finance and accounting sourcing are differing across industry sectors and countries;

What are the experiences of finance professionals to date and how they rate their sourcing performance in terms of both cost control and productivity improvements;

Whether today's finance functions are realizing finance transformation improvements with the right level of finance talent and technology they need;

Whether finance leadership's business objectives are being met by a shared service or outsourced finance delivery model - and have these business objectives changed since they started on their transformation journey;

How finance leaders are measuring sourcing success.

Does your organisation use finance shared services or outsourcing? If so, we would like to hear from you.

Your feedback will be aggregated with that of others and will be a key input into our series of research and insights looking at finance transformation by both ACCA and HfS. At the end of this survey we welcome you to register for a copy of the report findings from this survey and enter a free prize draw for an iPad 2 as a thank you for time and feedback.

As per usual, election year brings up the age-old argument about how to combat the "threat" of outsourcing. However, let's not forget this is nothing new..I recall in 2004 when an HR Outsourcing conference was subjected to a vociferous demonstration by anti-outsourcing protesters (I mean - seriously - HRO? Most of it is onshore in any case).

Today's angry hoards of protesters are (and quite rightly so) expressing anger at the obscene wealth generated by Wall St, and barely even notice the fact that real "American" companies, such as Apple, employs 500,000 people in Chinese factories and that lovely "American" Hanes underwear brand employs thousands of people in Vietnamese sweatshops.

Yes, the argument is boring, flawed and jaded, and while politicians need to be seen to be against it, they do little to prevent it. However, one major stride of progress that Obama emphasized during his recent State of the Union speech has been how the US automotive industry has been brought back from the brink:

"This blueprint begins with American manufacturing. On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen. In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world's number one automaker. Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories. And together, the entire industry added nearly 160,000 jobs.

"We bet on American workers. We bet on American ingenuity. And tonight, the American auto industry is back.

"What's happening in Detroit can happen in other industries. It can happen in Cleveland and Pittsburgh and Raleigh. We can't bring back every job that's left our shores. But right now, it's getting more expensive to do business in places like China. Meanwhile, America is more productive."

Why is the experience of the resurgent US automotive industry significant to resurrecting its flagging IT industry?

Let's not beat around the bush here. The US onshore IT industry has ceded much of its dominance to India in recent years. While three-quarters of ERP development work was performed onshore in 2008, the proportion has today decreased to 65%:

I'm not going to get into the tedium of this latest wave of toothless "protection" acts aimed at creating tax incentives / disincentives, and other various penalties and inconveniences for US organizations which dare to employ foreign labor outside of the country to service their business operations and manufacture their wares. Simply put, there are already US IT services firms, such as Systems in Motion, pushing services at US enterprises with wage rates comparable, and often even cheaper, than those of Bangalore - especially those which leverage resources in low-cost onshore locations such as Michigan. And while some niche onshore providers are finding pockets of business and growth for themselves, you can't ignore the bigger picture that the US onshore IT industry is on the decline. At HfS, we've even seen enterprises actually declining to use onshore US IT services firms which underbid their Indian competition, because many of these buyers of services are so invested in the Indian IT brand. Today, many senior IT executives within US organizations actually prefer to invest in their Indian IT relationships than their US ones!

The Bottom-line: It's time for government to help re-brand US IT services

While the US IT services industry is nowhere near the state of distress that the US auto industry found itself during the last Recession, isn't it now clear that the only way for the government to stimulate the success of its onshore industries is to invest in them, to aggressively help them, to encourage them to hire locally with real investment? By investing so heavily in their automotive industry, they also re-branded the entire American automotive business. Nothing's worse than a business in financial decline, and by giving automotive a helping hand, they also improved the perception and credibility of the entire US automotive industry.

The Chinese and Indian governments, as examples, constantly invest in their local business to help them grow and be successful - so why can't the US government do the same for its flagging IT industry, that it did for automotive?

I, for one, would be happy to see my tax dollars being re-invested in stimulating local industries and job creation in growth industries like IT services and Cloud computing, BPO, social media and medical research, so why not follow the example of how the US automotive industry was salvaged and do the same for IT? Invest in some local companies... hire train and their local workforces to support our organizations' IT systems. Small measures never work, waste everyone's time and allow our more aggressive foreign counterparts to advance further ahead in industries such as global IT services. Isn't now the time, in an election year, to stop the rhetoric and actually make commitments to growing local industries that have a direct impact?